ZTE warns US: ‘We may go to law to protect company, customers and suppliers’

20 April 2018 | Alan Burkitt-Gray

ZTE has said that it might take legal action against the US authorities that have banned it from using US hardware and software.

The company does not give any details about the legal avenues that may be open to it, but the threat comes at the end of the first response from the company to this week’s action by the US Department of Commerce (DoC).

ZTE said it is “determined, if necessary, to take judicial measures to protect the legal rights and interests of our company, our employees and our shareholders, and to fulfil obligations and take responsibilities to our global customers, end-users, partners and suppliers”.

ZTE is reeling from the DoC’s decision earlier this week to declare it a “denied person”, along with its members of staff, agents and others. That means US companies cannot license their chips, hardware or software to ZTE.

US companies previously identified as supplying ZTE – either for onward sale to telecoms companies or enterprises, or for internal use by ZTE – include Cisco, Dell, Intel, Microsoft, Oracle, Qualcomm and Symantec.

Now, in today’s statement, ZTE says that the move was unfair as the company itself “self-identified the issues” and reported the problems to the US Bureau of Industry and Security (BIS).

The company said that it had established a team to monitor export compliance. “Within ZTE, compliance is regarded as the foundation and bottom-line of the company’s operation,” it said.

The company added: “ZTE has established a compliance committee led directly by its CEO; built a global team of experienced export control compliance experts; engaged several world-class counsels and consultants to provide professional guidance in order to establish and optimize ZTE’s export control compliance structure, system and procedure; introduced and implemented the SAP Global Trade System (GTS); organized compliance training covering over 65,000 employees; cooperated comprehensively with the independent monitor designated by US government to ensure the monitor’s real-time and transparent monitoring over ZTE’s implementation of the relevant agreements with US government and applicable export control compliance requirements, and provided over 132,000 pages of documents.”

It said: “It is unacceptable that BIS insists on unfairly imposing the most severe penalty on ZTE even before the completion of investigation of facts, ignoring the continuous diligent work of ZTE and the progress we have made on export compliance.” The company said that “a prestigious US law firm has been engaged to conduct independent investigation”.

It warned: “The denial order will not only severely impact the survival and development of ZTE, but will also cause damages to all partners of ZTE including a large number of US companies.”

ZTE is one of the largest makers of smartphones in the world and at least half of them have used Qualcomm chips. Both Qualcomm and its rival, Intel, are now banned from supplying ZTE for seven years.

The Reuters news agency reported this morning that China is reacting to the news by stimulating its domestic semiconductor market. It quotes an unnamed person familiar with the moves as telling it: “In the last few days senior Chinese officials have met to discuss plans to speed up the development of the chip industry.”

The agency also quotes the China-based Global Times newspaper as saying: “China won’t allow the US to use chips as a stick against it. China can take steps to replace foreign-made chips with domestic. The Trump administration is helping us Chinese make such a decision.”